© 2013 McKesson Specialty Health. All Rights ReservedFor internal use only/proprietary and confidential. CMS Releases 2014 Medicare Physician Fee Schedule Rule

2 © 2013 McKesson Specialty Health. All Rights ReservedFor internal use only/proprietary and confidential. Medicare Physician Fee Schedule Final Rule Released  Nov. 27, 2013, CMS released the final rule updating payment policies and rates for services furnished to fee-for-service beneficiaries under the Medicare PFS Text of rule in Federal Register on Dec. 10, 2013; schedules on- line New payment rates become effective Jan. 1, 2014 Comments to be accepted on most rate issues through Jan. 27, 2014

3 © 2013 McKesson Specialty Health. All Rights ReservedFor internal use only/proprietary and confidential. Medicare Physician Fee Schedule Final Rule Released  Certain revised regulations become effective Jan. 27, 2014: Regulations extending time period for waiver of overpayments due to finding of lack of medical necessity from 3 to 5 years Regulations making compliance with all state laws relating to qualifications/licensure of auxiliary personal involved in provision of “incident-to” services a condition of payment Regulation allowing technology-based updates to clinical lab fee schedule  E-R x ing regulation requiring NCPDP version 3.0 for exchange of formulary/ benefit data with Part D plans becomes effective Jan. 1, 2015

4 © 2013 McKesson Specialty Health. All Rights ReservedFor internal use only/proprietary and confidential. Oncology/Urology-Specific Impact of Payment Rate Changes SpecialtyProposedFinal Hematology/Oncology– 1%– 2% Radiation Oncology– 5%+ 1% Radiation Therapy Centers– 13%– 1% Urology– 2%– 1%  Key factors underlying payment rate changes: Elimination of proposed OPPS/ASC cap - Prevented drastic proposed cuts to flow cytometry of 72% (88184) and 75% (88185) Rescaling of RVUs to match weights assigned to work, PE, MP in revised MEI Service level changes to RVUs for new, revised and misvalued codes, with interim updates to work RVUs for ~200 codes - Total RVUs for fell from 4.21 to 3.72 and for from 0.9 to 0.78, further exacerbating underpayment for chemotherapy administration Change to 90% utilization assumption for expensive D x imaging equipment

5 © 2013 McKesson Specialty Health. All Rights ReservedFor internal use only/proprietary and confidential. Other Key Provisions of Final PFS Rule  Implements statutorily mandated across-the-board SGR cut of 20.1%, making conversion factor $ for 2014 (absent Congressional action) 2013 CF = $ (would have been $ without Congressional action) Proposed Rule projected SGR cut of 24.4% Rescaling of RVUs to reflect revised MEI work, PE and MP weights reduces Medicare expenditures and blunted projected impact of SGR Rule reiterates CMS’ intent to work with Congress on permanent SGR “fix”  Implements statutorily mandated expiration of 1.00 work GPCI floor and updates all GPCIs based on new data, with 2 year update phase-in

6 © 2013 McKesson Specialty Health. All Rights ReservedFor internal use only/proprietary and confidential. Other Key Provisions of Final PFS Rule  Aligns quality measures across incentive programs and allows clinical data registry reporting for PQRS and EHR incentive programs  Expands Physicians Compare reporting: all measures reported using GPRO for groups of all sizes; certain measures for groups using registry and EHR reporting; CG-CAHPs for groups of >100, all based on 2014 participation  Continues implementation of value-based payment modifier, expanding program to groups of >10 in 2016

7 © 2013 McKesson Specialty Health. All Rights ReservedFor internal use only/proprietary and confidential. Payment for Complex Chronic Care Management  Separate reimbursement for non-face-to-face complex chronic care management services to begin Jan. 1, 2015 New G Code available to PCPs or specialists who bill under PFS - Only one professional a month may bill for any given patient Code to cover >20 minutes of care coordination management every 30 days; services many be furnished “incident-to” ; no Annual Wellness Visit link Eligible patients to have >2 chronic conditions projected to last >12 months or to death and of type that place patient at significant risk of death, acute exacerbation/decompensation or functional decline Patient to agree in writing to receive service because of co-pay Services to be furnished in accordance with standards established by regulation in 2015 PFS rule. Standards likely to require: - 24/7 access - Development and maintenance of treatment plan - Coordinate with other providers - Evaluation of medication regimes